Home Management Internal & External Environment | Factors Affect Organisational, Decisions

Internal & External Environment | Factors Affect Organisational, Decisions


Internal & External Environment | Factors Affect Organisational, Decisions: Factors influencing the organizational decision internal and external environmental. Hence It Describes in the organisational environment,
Each company has its own environment, whether it’s business or not. There is always a dynamic and changing organizational environment.

Changes are so frequent and every change brings so many challenges that the Organization’s managers and leaders must be attentive to changes in the environment. An organization’s environment – anything that has a positive or unpleasant effect on its operations.

Internal & External Environment | Factors Affect Organisational, Decisions


Abstract Environment

The environment includes abstract things like the image of an organization and distant visible issues such as country economic conditions and political situations. Therefore abstract and visible environmental forces require careful analysis. The systematic and adequate analysis generates the information needed to assess what the strategy is to be followed.

Managers cannot simply build on their assumptions and instincts to produce a sound and appropriate strategy. You must use information relevant to the analysis of the environment of your organisation.

Kinds of Organization in External and Internal Environment

We understand the environment or the conditions in which a specific activity is carried out with the word “environment.” And we know that Organization is a social entity with a hierarchical structure where everything is composed and act within it to achieve the collective objective.

The environment is always affected by organisations or more specific business organisations and their activities. An organisation is influenced by the environment in every action of the governing body.

The Environment for Organizations is the Internal / Micro-environment.

Macro environment / external environment. ( Internal and External Environment)
Environmental general.
An environment of the industry.

Both types of environments affect the operations of an organisation. Therefore, managers must carry out an in-depth analysis of the components of the it to develop a comprehension of the Organization’s external and internal situations.

Hence they can better determine their Organization’s required objectives and formulate appropriate strategies to meet these objectives based on their understanding.

Organization’s Internal Environment

Forces or conditions or environments within the organisation’s borders are the elements of the organisation’s internal environment. The internal environment consists generally of elements such as physical resources, financial resources, human resources, information resources, technological resources, corporate goodwill, and the like within or within the organisation.

The internal environment includes all within the Organization’s borders. Some of these are tangible, such as physical installations, plant technology, proprietary technology or know-how. Hence others are intangible, including information and communication ability, reward and task structure, performance expectations, management capacity for power structures, and the culture of the organisation.

The company can create and deliver value to the customer based on these resources. This value is essential in order to define the aim of the organisation and its premise. Do we add value by research and development or customer service, or by prompt delivery or the elimination of any customer costs intermediary??

Over a long period, organisations are building capacity. They consistently invest in certain areas in order to build strong, competitive companies on the basis of their uniqueness. They consistently invest in certain areas in order to build strong, competitive companies on the basis of their uniqueness.

External Environment

The outside world refers to factors, forces, situations, and events that influence its performance outside of the organization. It has economic, population, political/legal, socio-cultural, technological, and global aspects.

The manager would rely on the availability and resource deployment in the Organization to respond to an external environment. However, resource deployment is a crucial responsibility for management.

Top management is entrusted with the allocation of resources between on-going operations/activities and with future strategic operations, so that in some future time they may generate returns that require resources now to be fostered and associated risks. The top administration must balance the conflicting requirements of both since resources are always limited.

General Electric, for instance, is an aggressive innovator and marketer who has proactively and reactively changed his approach to maintaining its competitive position in the respective sectors. This means that General Electric has invested over the years in developing the capabilities, systems and processes it can react to. Internal environment elements are; proprietors and shareholders.

The Management Board.


Culture of Organization.

The Organization’s resources.

The image/goodwill of the organisation.

The internal environment mainly comprises the owners, the directors, employees and the culture of the organisation.

Owners and Shareholder

The owners are individuals who have invested and have ownership rights and organisational rights. Hence owner may be a person or group that began the enterprise; or purchased a share in the share market of the company. There is a time to change the policies of the company.

In the case of a sole-holding business, partners in a corporate partner company or shareholders in a limited company, or members of a cooperative society, the owners of an organization may be an individual. Although government of the country is the owner of public companies.

Anyone who owns the property is an integral part of the internal environment of the Organization. Owners play a major role in influencing business affairs. That is why managers should look after their owners more effectively.

Administrative Board

The Executive Board, a company’s body, is elected by stockholders and is responsible for oversight of a company’s top managers, such as the executive director.


Employees are the main element in the internal environment of an organization that performs administrative tasks. Individual employees are important components of their internal environment and also their trade unions.
They can change the Organization’s policy positively if properly managed. However, poor workforce management could lead to the company’s catastrophic condition.

Culture of Organization

Organizational culture is the collective conduct of an organization’s members and their values, visions, beliefs and habits. An organization’s culture plays a vital role in shaping its success because culture determines how well its organisation performs.


It plays a key role in shaping management conduct as the foundation of the internal business environment.
The culture of an organisation sees on the basis of its internal environment. Corporate culture influences the behavior of employees significantly.

Culture, including managers working in the Organization, is essential to every employee.
A strong culture helps a company better achieve its objectives than a company with a weak culture. Culture develops and ‘blossoms’ in an organisation over many years, beginning with the founders’ (s). Therefore culture is important to an organisation as an internal environmental concern, managers need to understand how it affects organisational activities.

Organization resources

The resources of an organisation can be discsses in five broad headings: physical resources, human resources; financial resources, information resources and technology. Hence land and buildings, warehouses, materials of all kinds, equipment, and machinery are the physical resources. Examples include office buildings, PCs, furniture, air conditioning and fans.

All employees in the organisation range from the top to the lowest level of the Organization, Examples are university teachers, manufacturing managers’ marketing officers, and manual workers. Hence financial resources include the capital used to fund the Organization’s activities, including working capital. Examples include owners’ investments, profits, reserve funds and sales income.

Information Resource

Information resources include ‘useable data required for efficient decision-making.
Examples include sales forecasts, supplier price lists, market-related information, employee profiles, and production reporting.

Image/goodwill of the Organization

An organization’s reputation is an immaterial asset of great value. High renown or goodwill develops an organisational image that is favourable to the public (so to say, in the minds of the customers).
No reputation cannot create a positive image; a harmful picture damages the Organization’s efforts in a competitive world to attract customers. The Organization’s internal environment consists of the conditions and forces within the organisation.

Internal environment {micro-environment sometimes called} portrays the ‘in-house’ situations of an organization.
An organization controls these circumstances fully. In contrast to the outside environment, the internal environment can be controlled by companies.

The internal environment comprises different internal factors such as resources, owners/holders, board, staff and syndicates, goodwill, and corporate culture. The following factors are detailed outside in.

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